Duly Noted: Run While You Can

Raise taxes and lose across the board: the IRS shows how. Euro troubles: run while you can. Those nasty populists. Distorted perspectives that are politically correct.

1. Congress’ decision to revise the US’ hefty tax code deserves attention. The measure is aims to squeeze money from declared American owned investments if the fund is managed by foreign entities. The regulation puts an additional burden on foreign investors by forcing them to disclose everything about their American clients. For aliens investing in the US is becoming more costly and complicated. These measures against a target group that has no lobby should be big news. They are not because, as also this legislation proves, the US is an insular country. That since Pearl Harbor this impression is caused by an error does not seem to impress anyone.

Even so, confidence in the US economy, the credibility of the dollar and the moderation of her deficit, depend on continued foreign investment. Already prior to the passing of the new rules the prescient acted. Some persons and institutions were quietly loosening their business ties to the US and Americans in general. What one hears and reads now is that the changes imposed sap the desire of engagement.

Exporting us jurisdiction abroad, and now compelling foreign businesses to act as enforcers of US ordinances and as the collection agency of the IRS, are irritants. Not only “US Persons” are to be reported, but the status of shareholding legal persons – such as investment funds – are also to be investigated by operators. In case of error, the threatened sanctions are massive enough to elicit radical self-protection. It is to avoid everything that has to do with the, in this respect, unpredictably capricious USA.

If a foreign bank has an account at a US institution, under the terms of the new Foreign Account Tax Compliance Act, it must determine whether that institution has an agreement with IRS. If not then all gains become subject to 30% punitive tax to be collected by the deposition’s host. The ruling involves not only the activities of about six thousand banks but also 50 thousand to 200 thousand funds, fiduciaries and investment firms. This creates high administrative costs and exposes those involved to IRS surprises that can criminalize them. The result is that the separation from US clients and the avoidance of any US-related economic activity is emerging as a wise strategy. This is hardly an American interest. It will cost dearly because US government bonds and US stocks will lose attraction. Considering that much of the deficit is financed by trusting foreigners, the consequences will be of interest. Regrettably, the US taxpayer and job seeker will hardly become conscious of the laws made in his name that work to worsen the terms by which he lives. This raises questions regarding the future of US “Treasuries”. These are now placed at 3%+ interest. Regarding that advantage for the issuer, the foregoing suggests the possible end of a “good thing”. Indirectly that gives rise to a thought. “Is everybody entirely certain that there is no way that the American economy can be hurt?”


2. More about money. The Euro rests on pillars, some of which, if examined, might prove to be myths. One fiction is that no member will have a deficit above 3%. No € user, not even Germany, manage that. Greece, Ireland and Spain score above 10% while France and Portugal are just below that number. Therefore the €-Zone’s average temperature rises to above 6%. Consider that these are official statistics. Greek-style, and not unintentional inaccuracies, might be included. Another reason helps to undermine the trust in the system. Often the unnoticed inching towards bankruptcy became possible with the cover provided by supervising sympathizers in Brussels. Smarties advise one to “forget it” and to go into currencies that have the backing of a real country. Meanwhile, outsiders celebrate their luck of not having joined.


3. Political power and currency are, not accidentally, related terms. Although not a state, the EU has two things states have. One is a bureaucracy and the other is the coin of the realm. The main problem of the € is not the missing state as such. The existing and functioning common market compensates somewhat for the missing political unity and the central organs that can regulate. The difficulty is that, even with agreed upon procedures to protect the currency, the cultural differences within the haphazardly expanded union remain significant. These mean that the sense of obligation to conform to contractual agreements, whether private or public is not identical. What is regarded as cheating in some countries is viewed as a creative solution to snafus.

In all fairness, however, at the time of the entry of some candidates, the old members sent signals that they do not quite “mean” what they demand officially. Not infrequently, the political criteria for acceptance had not been met. That is the point when the cheating began. The hope had been that after the attainment of membership bad economic habits and the problems of governance imported into the community will be overcome. This lenience suggested that the established members are colluding with candidates (minority rights, corruption, clean elections). The seeming “understanding” made post-entrance solutions unlikely. Regarding monetary policy, giving marginal members reason to conclude that they will be bailed out, worsened old problems.


4. Amused, the writer is observing what is labeled as “extreme right wing” or as a “populist”. By now, the routine charge of populism has achieved fad status akin to piercings, baggy pants and snowboards. This notation addresses itself to the term “populist” when applied as a charge before ritual condemnation. There are things that we all know but which the elites, being domiciled in their “houses high on the hills”, can avoid. Since the problem does not fit their concept as in an ideal world it is not supposed to exist, they are reluctant to discuss the matter. If, inconveniently, someone publicizes unfitting concerns, the elite knows that it lacks an effective response. Therefore, in want of a convincing answer, the party raising the issue is dismissed as “populist”. In doing so, the claimant has essentially accepted defeat on a playing field that has been leveled to the traditional élites’ disadvantage. Perhaps populism should be given a new meaning. In practice, it appears that populism is when “they” have no good retort and must allege, for that reason, that the people are too simple to fathom the problem. Consequently, those who refer to the average person’s judgment are accused of misleading agitation to rally the barefooted. In trouble, the folks without arguments allege that the populists are wrong simply because they have simple answers. Indeed: “check-mate” is a simple matter.


5. The cult of fact-denial is a luxury of the overly confident. When practiced as a policy, it is to protect what is in totalitarian parlance a “general line”. The correctness of this program is felt to be so overwhelming that nothing that challenges it can be true. At the same time, any discussion of the apparent conflict of theory with lived life is deemed to slow the “marching column” as it slogs toward its goal. Perusing a literary review an illustrative incident provoked the foregoing. An authoress, originally from East Germany by the name of Maron, told of the matter. After her escape from the “GDR”, she addressed a gathering of women in Hamburg. When she described the East’s system as an “oppressive dictatorship”, the audience protested. They took her comment to mean that everything was perfect in their lives. Under oppression, Ms Maron meant State Security. The assembled ladies, suffering from a distorted perspective, found the Stasi’s equivalent in male chauvinist pig husbands who disliked dishwashing. Conclude: distorted views are correct if they rate PC.


The mood in the US.

The so called elites answer is quite wrong.  The TEA party movement has has come about by the high levels of taxation and corresponding loss of jobs.  The movement is turning into a ground swell and will rout the "health care bill".  When 20000 people gather in the Nevada desert to hold  a rally in the speaker of the senate  home town, normally a sleepy town with no stop lights.  There is determination to remove him from office.  We will elect new leaders this cycle and the next cycle.  The change in composition of the elected leaders will cause a shift in the government that will allow the change that was fosted on us to be removed.  The Americans will not wear chains, they chafe and will be discarded. 

The current global currency and the debt is far greater than the world can repay.  Investments in bonds will not bear the fruit that is expected.  Governments will fail as the Union/socialist/communist tries to exert its might and will cause collapse of the global currencies.  If Greece fails it will take the rest of the world with it. but any nation that fails will threaten collapse of the entire banking system. 


In the US the political climate has changed and this course will be corrected. 

RE: Duly Noted


2. As I noted here, Germany needs to throw off its “mind forged manacles” and withdraw from the EMU, at which point the euro will collapse.

3. If the EMU dissolves, the EU will be greatly weakened, and must either continue as a security and trading bloc or dissolve as well.

Even so, confidence in the

Even so, confidence in the US economy, the credibility of the dollar and the moderation of her deficit, depend on continued foreign investment.

Perhaps you are right. If so, it only underscores the fact that what "confidence" should rightly depend upon, that is, rational American fiscal and monetary policy, cannot be counted upon at all, and in fact has been long ago abandoned as something tenable.


"male chauvinist pig
husbands who disliked dishwashing

Nicely put.  Indeed west germans have not really understood the perfidy of communist dictatorships, even 20 years after they flocked into the sowjet occupation zone unhindered for the first time. They thought in categories of oppression that they could imagine. In West Germany it was naturally the oppressive men's world.

For the same reason, almost no German has a realistic view on the perfidy of the nazis or of fascism in general. But everybody is afraid of them all the same. So they rabidly attack anything that moves with just the hint of long-gone cultural and mental grace. After all, it could be racist, or nazi, or "Autobahn" (a very recent synonym for everything good that came of the 3rd Reich, but can naturally not be portrayed so in public).

So the only thing they prove by labelling you a populist is that they have long since become what they so despise.